Often the big focus on estate planning is making a Will. However, a Power of Attorney is just as crucial.
A POA is a formal document giving another person the authority to make personal and/or financial decisions on your behalf.
A POA is a key part of estate planning and is often thought of as being in place when people no longer have the capacity to look after themselves. However, people should consider initiating a POA sooner than later.
Both my parents have recently appointed me as their POA and the big lesson for me was it should have been done 10 years ago – particularly for my father.
Ageing parents come with a lot of responsibility including day-to-day tasks like banking, requesting new Medicare cards and paying nursing home bills.
The problem is many people don’t consider the importance of a POA until it’s too late and this was certainly the case for me. Organizing a POA is a lot easier when a parent is coherent and logical and not entering the first stages of dementia (and deafness!). It also makes the job easier for a lawyer. My lawyer had to be absolutely satisfied that my father had made the POA decision on his own, a little tricky when one is hard-of-hearing.
Once the POA was finalised, it certainly made life easier dealing with any tasks, such as visiting a Medicare office (now rebranded as Mygov.)
It is important to understand different levels of POA:
• a general POA
• an enduring POA
A general POA is the simplest approach; it allows the person appointed as the POA to deal with the person’s assets, such as bank accounts and property.
Here it is important to remember that a general POA ceases to operate if the person dies or loses their mental capacity to make their own decision. A general POA also does not extend to allow the person who is appointed the POA to make health and lifestyle decisions.
This is when an enduring POA could be considered. An enduring POA gives the authority to make both personal and financial decisions on behalf of a person. It also continues to operate after a person loses the mental capacity to make his or her own decisions. It is a very powerful document and therefore must meet additional requirements by the lawyer.
You can take out both a general and enduring POA – I got a bulk price deal from my lawyer!
On a serious note, when thinking and initiating a POA, it is crucial to discuss the issues with your family to ensure everyone is on board – will it be one or more siblings to act as a POA? Your parents have to be absolutely comfortable with the process and it can be a sensitive time. It is one of the most significant decisions to make so make sure you get proper legal advice before executing a POA.
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